Key points:
- AP automation safeguards payments and helps keep bank accounts safe from fraud
- A ransomware attack isn’t just a major headache–it can be devastating
- See related article: Higher education must innovate to meet students’ needs
- For more news on campus administration, visit eCN’s Campus Leadership page
The aftermath of the pandemic has shaken every industry category to the core, including the higher-ed sector. Not only have expenses skyrocketed and enrollments declined, but budget holders and finance staff members are asked to do more with fewer resources available to them. Without realizing it, many colleges and universities suffer from the shortcomings of manual, paper-based accounting processes, such as hidden costs, a significantly greater risk of fraud, and substantial inefficiencies.
Finance professionals can play a significant role in the success of an educational institution, and they are a strong force in connecting the community at various touch points. Their work intersects with everything from academic performance, to staffing to student enrollment, and more. Most importantly, they are the first line of defense against fraud attacks.
In 2021, a report from the Association of American Colleges and Universities identified the top challenges and strategic priorities for colleges and universities. Topping the list of challenges was “Financial constraints,” according to 74 percent of respondents.
One administrative process that all institutions can elevate is their Accounts Payable (AP) process, resulting in reduced risk of fraud and more time to focus on initiatives such as providing world-class student experiences, improving and executing campus DEI initiatives, and fostering career growth for students and staff.
Types of fraud attacks
AP automation safeguards payments and helps keep bank accounts safe from fraud. The internal security teams employed by leading AP automation providers prevent hundreds of fraud attacks against their clients, saving millions of dollars each year. These types of fraud attacks include:
- Business Email Compromise (BEC):
- BEC is when scam artists use legitimate emails to dupe accounting departments into transferring funds into illegitimate accounts.
- Vendor impersonation:
- Fraudsters send fake emails to companies asking for payment. For example, a scammer might use “john.kelly@compony.com” (note that company is spelled with an O) instead of “john.kelly@company.com” to trick victims into thinking the email is legitimate.
- Phishing:
- Fraudsters send a fake message designed to trick a person into clicking on a malicious link or revealing sensitive information so the attacker can expose the victim’s device to malicious software or get their credit card information and passwords.
- Conversation hijacking:
- A targeted email attack in which cybercriminals insert themselves into existing business conversations or initiate new conversations based on information they’ve gathered from compromised email accounts or other sources.
Also, the fear of a potential cybersecurity threat can cause sleepless nights for finance teams at colleges and universities. According to a 2023 report by Emsisoft Malware Lab, 89 education sector organizations within the U.S. were impacted by ransomware, including the campuses of 44 colleges and universities.
As some higher-ed institutions have learned the hard way, a ransomware attack isn’t just a major headache – it can be devastating. Lincoln College, a historically Black college in Illinois, closed after 157 years in operation due to the combined disruptions of the COVID-19 pandemic and the high costs related to recovery from a ransomware attack.
Why fraudsters prey on higher ed
Higher-ed AP departments are prone to fraud for many reasons, including:
- Publicly disclosed financial records
- Colleges and universities are at risk because of the need to purchase goods and services from the right person for the best price. Solicitations, bids, and proposals are all publicly listed, making it easy for fraudsters to attack.
- Little to no segregation of duties due because of staffing shortages
- Failure to communicate or enforce policies and procedures
- No anti-fraud programs or training available for staff
- Lack of internal controls
The risk of fraud lurks in the background of every financial transaction, so colleges and universities must be ever vigilant when making payments. Unfortunately, most organizations don’t think about fraud risk until it’s too late. A high-quality AP automation partner incorporates sophisticated security measures–such as encrypted account data, Positive Pay and Payee Positive Pay, and multi-factor authentication–to help stop hundreds of fraud attacks yearly.
Eliminating paper increases security
Manual, paper-based accounting processes are costly, time-consuming, and drastically increase the potential of a fraudulent attack. Payment Automation is an effective solution in helping schools mitigate the risk of AP fraud because it eliminates paper checks and provides more secure ways to pay vendors. Paper checks are highly susceptible to fraud as they contain vulnerable information that can be easily “washed” and forged by fraudsters.
Award-winning Payment Automation providers also provide Positive Pay for clients, giving them even more protection against an attack. Positive Pay is an automated cash-management service companies use to deter check fraud. Banks use this feature to match the checks a company issues with those presented for payment. Any check considered suspect is sent back to the issuer for examination. However, it’s worth noting that often banks will set the threshold too low, causing a massive influx of false positives that must be manually reviewed, which can further impact the existing bottlenecks in AP processing.
Conclusion
Implementing AP automation and keeping up to date on security awareness and compliance training can help higher education institutions prevent fraud and add extra layers of security where it’s needed most. In the long run, manual AP processing prevents the business departments at colleges and universities from putting their focus on where it matters most: on students. So, isn’t it time to bring your finance processes into the digital age with top-tier AP automation solutions that earn an A+ for security?
Tom Smith is an Account Executive for the Higher Ed sector at Paymerang, a leading finance automation firm headquartered in Richmond, Va. The company’s expertise in Higher. Ed includes implementing Accounts Payable solutions for colleges and universities including Nazareth College of Rochester, Charleston Southern University, Columbia College, and Beloit College among others. To learn more, visit https://www.paymerang.com/industries/higher-ed/
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